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Stockholders' Equity Transactions

6 Selected data from the comparative balance sheets of Labtec Company as of December 31, Year 1, and Year 2 appear below:
Year 1 Year 2
Preferred stock, $100 Par, Issued at Par $0 $ 600,000
Common Stock, $30 Par 300,000 345,000
Additional Paid-in Capital 120,000 177,000
Retained Earnings 1,260,000 1,320,000
Total $1,680,000 $2,442,000
*Less Cost of Treasury Shares -72,000 -
Total Shareholders' Equity $1,608,000 $2,442,000

*Cost of 1,500 shares.

The following transactions occurred during Year 2:
a. March 1, Year 2: The company resold the Treasury shares on the market for $57 per share.
b. June 30, Year 2: The company declared and issued a 10-percent stock dividend at a time when the market price was $63 per share.
c. September 15, Year 2: The company issued additional shares of common stock on the open market for cash.
d. November 16, Year 2: The company issued new preferred shares on the open market for cash.
e. December 31, Year 2: Net income for Year 2 was $195,000. The company declared and paid cash dividends of $72,000 on the last day of the year.
Prepare journal entries for each of the transactions and events affecting these shareholders' equity accounts during Year 2.

Solution Preview


Please find the Journal Entries attached. Also, please find below the explanation of each entry

a) Originally the Treasury Stock has been purchased for ($72,000/1500) $48 per share, the entry to record the sale of Treasury Stock above cost would be a debit to cash for (1500 x $57) $85,500, Credit to Treasury Stock for $72,000, and a credit to Paid-in-Capital from Treasury Stock ($85,500 - $72,000) $13,500

b)Number of common Stock Shares Outstanding = 10,000 ($300,000/$30)
Number of Shares to be issued = (10,000 x 10%) = 1000. Total Amount to be Debited to Retained Earnings = (1000 x $63) = $63,000. Credit Common Stock for $30,000 (1000 x $30), and Credit Additional Paid-in Capital for $33,000 ($63,000 - $30,000)

c) The balance in Common Stock after the declaration of a stock ...

Solution Summary

The problem is an excel sheet that shows the journal entries for different stockholders' equity transactions.